ROME (BLOOMBERG) - Italian President Sergio Mattarella begins intensive talks with political leaders Wednesday (Aug 21) to determine whether a new ruling coalition is viable or the country must hold fresh elections.
Those are the two main options emerging for the head of state after Prime Minister Giuseppe Conte resigned Tuesday, little more than a year after taking over a populist alliance of the League Party and Five Star Movement.
Mr Mattarella, who has the sole power to appoint governments and call elections, is ready to give Five Star and the opposition Democratic Party, or PD, time to strike a deal, although it would be days rather than weeks, newspaper Corriere della Sera reported.
Consultations with Mr Mattarella will start at 4pm in Rome, though talks with the bigger parties aren't due until the following day.
In a belligerent address to parliament, Mr Conte declared Tuesday that the coalition featuring Mr Matteo Salvini's anti-immigration League was dead. But he could still return as the head of another majority if Mr Mattarella judges it could offer some stability to the country.
Mr Salvini, 46, pulled his support from the governing alliance with the anti-establishment Five Star this month, seeking to cash in on strong poll ratings and attempting to wrong-foot the political establishment with a mid-summer power grab while parliament was in recess.
Bond investors have instead welcomed the prospect of an alternative coalition that could forestall a snap election.
True, any anti-Salvini alliance could turn out to be a fragile administration that only delays the moment when Italy's mountain of public debt - a chronic concern for both European officials and international investors - comes under the control of a right-wing ideologue set on confrontation with Brussels.
Yields on 10-year Italian bonds touched 1.31 per cent on Tuesday, the lowest level since 2016, while the spread over German bonds - a key gauge of risk in the nation - dropped to 200 basis points for the first time in nearly two weeks.
If Mr Conte's fiery appearance in the Senate Tuesday afternoon proves to be his final act as premier, he left no one in any doubt as to who he blames for his demise.
Mr Conte charged that the League leader's demand for an election was self-interested and irresponsible. With Mr Salvini sitting alongside him in parliament, he took his nemesis to task for his non-stop campaigning, saying it isn't in Italy's interest to hold elections every year.
The premier also accused his deputy of not properly responding to allegations in the so-called Russiagate case and said he had overstepped his role as minister.
The populist coalition's life "terminates here," Mr Conte said. The League leader "assumed a big responsibility" in precipitating the crisis, Mr Conte said.
While the premier's remarks were interrupted several times by shouts from lawmakers, Mr Salvini remained impassive, occasionally shaking his head. But the combative deputy premier didn't pull any punches when his turn came to speak.
The unruly coalition, which lasted just over a year, wasn't brought down by him but by the fictitious "Signore No" that Mr Salvini likes to invoke to demonstrate inactivity and inertia among his political enemies.
"I'd do it all over again if I had another chance," Mr Salvini told Senators.
Mr Salvini claimed the League is ready with a 50 billion euro (S$76.79 billion) budget plan that will allow for tax cuts and more spending, and ridiculed Five Star for considering an alliance with the PD - a group they've spent years attacking.
"I'm not afraid of a PD-Five Star alliance," Mr Salvini said.
Five Star and the PD have been holding unofficial talks to gauge the chances that they can form a government, but more structured negotiations will only start after Mr Mattarella kicks off consultations, according to PD officials who asked not to be named discussing confidential matters.
The back-and-forth of Tuesday's proceedings in parliament shows that Five Star and the PD have been in contact for weeks, Mr Salvini charged, in comments to reporters in Rome, wishing his former coalition partners "good luck" if they decide to work together with the PD.